In the entire eighties, Siemens Pakistan was involved in the production of 30MVA power transformers, which were extended to 60MVA in 1987. The engineering firm made another breakthrough in 1996 and 1998 when it able to successfully setup 412MW combined cycle Rousche Power Plant, and became the first value-added seller of SAP. In 2000s, Siemens Pakistan completed the first load dispatch center for K-Electric. It brought in the 250kV transformers in Pakistan, and continued grid stations for K-Electric, WAPDA and DEWA Dubai. The firm has also been successful in completing commissioning of Sawan and Kandhkot gas compression trains, equipping of Al Razi Medical Diagnostic Centre with imaging equipment, and getting a contract for airfield lighting for Benazir Bhutto International Airport.
Later in 2012, the firm armed Karachi's largest mall - Dolmen Mall - with safety, security & building management technology. As far as its business segments are concerned, it has four sectors with 16 divisions. Within the energy sector, it has divisions for power generation, wind power, power transmission and energy services. The healthcare segment involves imaging and therapy systems, clinical products, and diagnostics and customer solutions, while its industry divisions consist of industry automation, technologies, and customer service. Another vital segment of Siemens Pakistan is the infrastructure & cities which consists of building technologies, rail systems, mobility and logistics, and smart grids. Of these segments, energy sector has been the forerunner of the growth the company has witnessed.
Shareholding pattern and share price With Siemens AG, Germany as a major shareholder, holding over 74 percent of Siemens Pakistan Engineering Company Limited, the remaining portioned the company is largely comprised of 12.64 percent of National Investment Trust. The pattern is shown in the table. Siemens Pakistan is a thinly traded stock.
Past performance Siemens Pakistan Engineering Company Limited has been in coarser times in the past as revenues and profits have been on a decline in some five years. Similar trend has been seen in exports, new orders, and contracts outside of Pakistan. Net turnover and annual orders have halved, while the firm has moved from yearly profit of over a billion rupees in 2009 to a loss of almost a million for the year ended September 30, 2013. Siemens Pakistan's financial year ends in September.
Causes contributing to the company's dwindling performance have been the termination of contract worth of Rs 1.992 billion by the Civil Aviation Authority (CAA) relating to power supply and telecommunication network at New Benazir Bhutto International Airport, Islamabad. The firm has been impugned for delays on the project, which led to such an action. Also, delays in other projects have affected its various business segments. With falling revenues and income, the firm has been involved in restructuring, rightsizing, portfolio adjustment activities for a few years now, which have also affected profitability.
The highlight of financial performance by Siemens Pakistan in 2014 was the improvement in gross margins, as some signs of recovery were witnessed; the firm got the contract for the work at New Benazir Bhutto International Airport, Islamabad by the CAA again in the financial year 2014.
However, the firm continued to bear losses for the year as both orders received and sales revenues were less by 25 percent year-on-year in 2014. As per the company's financial statements, 48 percent of the new orders were in the energy sector including orders for the design, supply, erection, testing and commissioning of 220kV and 132kV substations. And the declining growth in turnover was due to missing orders for transformers and transmission business. Infrastructure and cities, industry and healthcare sectors contributed to 26 percent, 20 percent and six percent, respectively. In sales too, energy sector led the growth with 49 percent contribution, followed by Infrastructure & Cities, Industry and Healthcare sectors.
In 2015, Siemens Pakistan signed a contract with K-Electric worth approximately Rs 10.7 billion, for execution of transmission package aimed at enhancement of K-Electric's transmission system capacity and improving reliability and stability of transmission infrastructure.
In the same year, the firm's new orders and sales saw a negative growth of 4.8 percent and 5.3 percent year-on-year, respectively. Its bottom-line dunked further into loss. Key reasons for loss include increase in continuation costs in the Islamabad International Airport Projects, cost over runs in some other projects and under absorption of fixed costs due to reduced sales.
In 2015, the company's office in Islamabad was relocated to a new location, which will apparently bring the company closer to its customers. Effective December 31, 2015, Siemens Pakistan's annual report highlights that the firm will cease to participate in business in Afghanistan due to withdrawal of sales right by Siemens AG, Germany for the Afghanistan territory.
2016 and 2017 performance 2016 turned out to be a turnaround year for Siemens Pakistan; the firm became profitable again after having gone through years of restructuring and portfolio rationalization. Improvement in the top line shows efforts of management and an increased level of employees' commitment and dedication. The improvement in new order as well as revenue compared to 2015 and 2014 shows has been significant in 2016.
This time, the firm ended up in profits despite one-off losses arising from project charges due to delay in the execution of new Islamabad International Airport project, losses in certain energy transmission projects, and excess cost provisioning. It also gained from the sale of some key fixed assets. The Energy Management (EM) Division contributed 73.6 percent of the total revenue. Overall EM Division revenue and operating profit on year on year basis increased by 23.4 percent and 122percent, respectively.
In the nine-month period of 2-17 so far, the firm reported a loss before tax and profit on sale of discontinued operations.
Outlook The firm has been looking into transferring the Healthcare Division of the company; in 2015, the BoD decided to transfer the Healthcare business, at a fair market value, to Siemens Healthcare (Pvt.) Limited - a subsidiary of Siemens Diagnostic Holding II B.V., Netherlands. The firm aims to benefit from low price environment.
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Siemens Pakistan
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2011 2012 2013 2014 2015 2016
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Sales and profitability
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New orders (bn) 13.34 13.82 12.35 9.26 8.81 22.84
GP ratio 11.13% 6.62% 2.51% 7.20% 5.33% 9.19%
NP ratio 0.45% -0.04% -7.48% -5.36% -5.70% 20.68%
ROE 38.00% 4.09% 5.01% 4.12% 3.98% 40.22%
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Liquidity
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Current ratio 1.19 1.23 1.09 1.09 1.22 1.38
Quick ratio 0.96 0.98 0.92 0.87 0.74 1.17
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Market
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Dividend Yield 0.01 0.15 0.02 0.01 0.01 0.13
Interest cover 3.16 0.07 -3.08 0.06 -1.28 109.20
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Efficiency
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Fixed asset turnover 9.12 8.71 8.91 10.05 26.43 53.67
Total asset turnover 0.66 0.69 0.74 0.65 0.70 0.75
Inventory turnover 1.74 1.90 2.06 1.55 1.82 2.52
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Source: Company accounts
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Siemens Pakistan Engineering Company Ltd
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Shareholding Patter as On Dec 2016
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Categories Percentage
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Director 0.01
Siemens AG,Germany 74.65
National Investment Trust 12.64
Banks 2.92
Insurance companies 2.95
Modarabas & Mutual Funds 0.34
General Public 4.36
Others 2.13
Total 100
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Source: Company accounts
Copyright Business Recorder, 2017